INSURANCE - Contract of insurance covering 'loss' 'resulting from' a 'claim' - Judge found settlement amount reflected various commercial and legal benefits - Judge found settlement amount not attributable to counterclaim - Whether 'obligation to pay under settlement' constituted 'loss' - Whether 'loss' required establishment of underlying liability independent of settlement - Express reference to settlements in definition of 'loss'.

INSURANCE - Settlement - Reasonableness of settlement - Judge found settlement not reasonable because settlement amount attributable to larger commercial agreement - Legal advice of significant risk counterclaim would succeed - Counsel considered settlement amount within scope of potential liability if counterclaim successful - Settlement amount represented cost of settling counterclaim and avoiding risks posed by counterclaim to applicant's business - Settlement reasonable - Leave to appeal granted - Appeal allowed.

WORDS AND PHRASES - 'claim' - 'loss' - 'resulting from'.

National Australia Bank Ltd v Nautilus Insurance Pte Ltd [No 3] [2019] FCA 2139; AstraZeneca Insurance Company Ltd v XL Insurance (Bermuda) Ltd [2013] EWCA Civ 1660; [2014] 2 All ER (Comm) 55; CIMIC Group Ltd v AIG Group Ltd [2022] NSWSC 999; Delta Pty Ltd v Team Rock Anchors Pty Ltd [2018] 1 Qd R 564, referred to; Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance (2018) 359 ALR 314, discussed.

1. After resolving a commercial dispute that had been the subject of litigation in the Trial Division, the applicant Sayers Property Holdings Pty Ltd ('Sayers') claimed an amount of $1,971,604 from the respondent AIG Australia Ltd ('AIG') under an insurance policy it held with AIG. The rejection of that claim by AIG gave rise to a further proceeding in the Trial Division. Sayers was unsuccessful in that proceeding and now seeks leave to appeal.
2. The proceeding which was settled had been commenced by Sayers against Di Dio Nominees Pty Ltd ('Di Dio') on 13 February 2017. In that proceeding, Sayers sought specific performance of a contract for the sale of land Di Dio owned in Tarneit. Di Dio had granted Sayers an option to purchase the land on 15 March 2010, and Sayers alleged that it had exercised that option on 9 September 2015. The land was also the subject of an agreement for lease dated 15 March 2010 and a lease that commenced on 10 September 2012. Pursuant to the lease, Sayers operated a gaming venue on the land. It undertook construction on the land for that purpose and by 31 July 2013 its costs of doing so totalled $5,350,140.
3. Di Dio counterclaimed, alleging that the accountant and adviser to Di Dio, Ori Salvalaggio, had failed to disclose to Di Dio that he was a director and 20 per cent shareholder of Sayers. It was alleged that this was a breach of Mr Salvalaggio's fiduciary duties to Di Dio, and unconscionable conduct, for which Sayers was responsible.
4. Di Dio sought an order setting aside the agreement for lease, the option to acquire the land and any contract for the sale of the land to Sayers. Its counterclaim also pleaded a Barnes v Addy[1] claim against Sayers and alleged contraventions of s 51AC(1) of the Trade Practices Act 1974 (Cth) and s 21(1) of sch 2 of the Competition and Consumer Act 2010 (Cth) ('Australian Consumer Law'), claiming an injunction and orders under the Australian Consumer Law. In the alternative, Di Dio sought equitable compensation.[2]
5. At a court-ordered mediation on 25 November 2019, the parties compromised their claims and signed a settlement agreement in which Sayers agreed to purchase the land from Di Dio for $11,000,000 instead of the previously agreed price of $8,925,140. Di Dio also agreed not to exercise an option granted by Sayers in connection with the agreement for lease and the land purchase option on 15 March 2010, under which Sayers would have issued shares to Di Dio giving it a 10 per cent interest in Sayers. In the settlement, the parties released each other from all claims arising out of or in connection with the 2017 proceeding or the subject matters of those claims.
6. In its proceeding against AIG, Sayers claimed under the policy for an alleged loss in the amount of $1,971,604. The figure represented the difference between the purchase price of $11,000,000 in the settlement agreement and the previously agreed purchase price of the land, subject to certain adjustments in respect of tax and other matters. It is convenient to refer to the amount of $1,971,604 that Sayers claimed it was effectively required to pay under the settlement, as the 'settlement amount'.
7. The judge found that Sayers had failed to establish that the amount claimed fell within the meaning of 'Loss' under the policy.[3]
8. Sayers seeks leave to appeal. For the reasons that follow, leave to appeal should be granted and the appeal should be allowed.

1. Sayers was incorporated in May 2009. Mr Salvalaggio was one of its five founding directors and a shareholder upon its incorporation. He was also an accountant providing services to Di Dio and its principal Angelo Di Dio.
2. The negotiations for the development of the land occurred between May and August 2009. Sayers engaged Pont Earle lawyers and Di Dio engaged Best Hooper lawyers. Mr Salvalaggio was the point of contact for Sayers.
3. On 15 March 2010, the parties entered into the option to purchase the land, the option to acquire the shares, and the agreement for lease.
4. The agreement for lease was for a term of not less than 10 years with an option for three further terms of five years (25 years total). The option to purchase the land provided that, within three years after 15 March 2010, Sayers could purchase the land (including the gaming venue) for an exercise price of $8,925,140.
5. Subsequently:

(a) on 8 September 2011, Di Dio and Sayers entered into a building contract for the construction of a gaming venue and car park on the land;

(b) on 19 October 2011, Di Dio, Sayers and Mr Salvalaggio entered into a project management agreement, pursuant to which Mr Salvalaggio was appointed project manager;

(c) on 27 March 2014 Di Dio and Sayers executed the lease, which had a commencement date of 10 September 2012;

(d) as mentioned above, by 31 July 2013, construction costs as estimated by Sayers' solicitor had reached $5,350,140;

(e) on 9 September 2015, Sayers notified Di Dio that it exercised the option to purchase the land; and

(f) on 7 October 2015, Di Dio notified Sayers of its intention to exercise the option to acquire the shares.

1. On 25 November 2015, Sayers signed a contract of sale of the land. The purchase price in the contract of sale was $8,925,140. Settlement was to take place on the later of 60 days or 14 days after notice of the registration of a plan of subdivision.
2. On 9 March 2016, Di Dio informed Mr Salvalaggio by email that Mr Di Dio did not want to sell the property.

1. Sayers commenced the primary proceeding on 13 February 2017 and Di Dio duly counterclaimed as described above. On 26 February 2018, Di Dio joined its former solicitors Best Hooper as a further defendant to its counterclaim, alleging that the firm had negligently failed to advise Di Dio, and that Di Dio would not have signed a vendor's statement for the sale of the land, or exercised its option to acquire the shares in Sayers, if it had been properly advised.
2. On 23 July 2019, in response to a request from Best Hooper, Di Dio provided further and better particulars of the loss and damage alleged against Best Hooper in the counterclaim. The measure of loss claimed was the difference between the then current value of the land (being $11,900,000 as at 14 March 2019), and the amount that Di Dio would receive on settlement of the sale, being $8,925,140.
3. The alternative claim against Sayers for equitable compensation was not particularised. However, on 24 July 2019, the solicitor acting for Sayers, Chris Stakis, sent an email to John Kerr, director of Sayers, relevantly stating:

Di Dio has also provided a Particulars of Loss and Damage. ... Di Dio's claim for loss arises as an alternative to its principal claim that the option agreement be set aside. One possibility is that if the court finds a breach of duty, instead of setting aside the option agreement, the court could compensate Di Dio for any loss if proven. Di Dio's loss, as particularised, is founded on 3 alternatives measured against the contract price:

• against a valuation of $10.35M (being the value at the time the option was exercised)

• against a valuation of $11.9M (being the current value of the land); and

• against the value of an alternative motel development at $10.95M.

The last alternative is unlikely to be relevant ... In providing details of the loss, Di Dio has not taken into account the value of acquiring an interest in Sayers. Di Dio has also failed to provide a calculation of loss based on the value of the land in 2009 when the agreements were executed.

Further conduct of proceeding.

...

We are discussing the matter with counsel who is of the view that instead of procuring expert reports on the value of the business to properly assess any loss Di Dio claims, that a mediation be held to determine what it would take to resolve the matter without providing Di Dio any interest in Sayers. Ultimately, if you succeed in the litigation, Di Dio will have a right to a share in the business, which for obvious reasons is perhaps no longer tenable for the current owners.

1. By consent orders on 1 August 2019, Croft J referred the proceeding to mediation.
2. On 25 November 2019, prior to the mediation, Mr Guidolin of counsel, acting for Sayers, evaluated the prospects of success at 60/40 on the most favourable view of Sayers' case. At the trial, he later gave evidence that he had considered there was a real possibility that Di Dio would be enriched by the court setting aside the agreement for lease without any just allowance for Sayers' work or for improvements Sayers had made through its contributions to construction costs.
3. The matter resolved at the mediation later that day. Although Sayers' insurance broker had notified AIG of Sayers' claim under the policy, AIG had reserved its position on the claim, and Sayers defended the counterclaim without the input or involvement of AIG.
4. As between Sayers and Di Dio, the terms of settlement dated 25 November 2019 provided, as summarised by the judge:

(a) Sayers agreed to purchase the property, including all improvements and fixtures, from Di Dio for the price of $11 million plus GST on the same terms and conditions set out in the amended contract of sale including variations sought by Di Dio or as required by the terms of settlement; > > (b) the share option was cancelled; > > (c) the settlement of the sale of the property was agreed to take place within 30 days after registration of the plan of subdivision; > > (d) Di Dio agreed to proceed to register the plan of subdivision expeditiously but by no later than 1 May 2020. If it failed to do so, rental payments would stop on 1 May 2020; > > (e) Di Dio would provide Sayers with documents and information as to its communications with the Wyndham City Council and Land Victoria, and as to any capital gains tax that might be triggered by the surrender of the share option; and > > (f) wide releases were granted by all parties.[4]

5. Di Dio compromised its claim against Best Hooper on 17 December 2019. Best Hooper agreed to pay Di Dio $300,000 by way of contribution towards its legal costs in the proceeding within 14 days, without admitting liability.

1. Under the heading 'Policy Section 2 - Corporate Liability', the policy provided:

1. Corporate Liability

The Insurer shall pay the Loss of any Company arising from Corporate Liability.

...

1. This section of the policy defined 'Corporate Liability' as

any liability arising from any actual or alleged act, error or omission of a Company, except with respect to any Employment Practices Liability or Third Party Liability.

1. Under 'Definitions' in the General Terms and Conditions of the policy, the following terms were defined:

(b) a civil, regulatory, mediation, administrative or arbitration proceeding, including a counter-claim, seeking compensation or other legal remedy;

(ii) an Investigation or Critical Regulatory Event;

21. Loss

any amount which the Insured is legally liable to pay resulting from a Claim made against an Insured, including Defence Costs, Investigation Costs and all other costs and expenses payable under this policy, awards of damages (including punitive and exemplary damages), awards of costs or settlements (including claimant's legal costs and expenses), pre- and post- judgment interest on a covered judgment or award, and the multiplied portion of multiple damages. ...

1. On 20 January 2020, Sayers' solicitors advised AIG's solicitors of the claimed amount of $1,971,604. Sayers contended that this was a 'Loss' under the policy 'incurred by reason of the new purchase price of $11M, calculated against the old contract price of $8,925,140.00, and having regard to the net tax benefit arising in respect of [the] depreciation of the building costs between 1 February 2016 [and] 30 April 2020 ...'.
2. AIG's solicitors responded on 1 March 2020 rejecting the claim, on the basis that the settlement reached at the mediation had no real connection with the pleaded claims against Sayers, and instead involved a renegotiation of the price paid for the land on a commercial basis.
3. Sayers contended at the trial of its proceeding against AIG that the settlement amount was an amount which Sayers was legally liable to pay under the terms of settlement, representing compensation payable to Di Dio for the claims it made against Sayers in the counterclaim, and that it was not merely a commercial renegotiation of the purchase price but a reasonable settlement of the claims against Sayers.[5]
4. The judge summarised AIG's submissions, as follows:

(a) the 2017 proceeding was a claim for specific performance of the land option and some transaction documents by which Sayers had exercised an option to purchase the property from Di Dio for about $8.9 million; > > (b) Di Dio's counterclaim primarily sought that the land option and related transaction documents be set aside, enjoined or avoided;

(e) Sayers mischaracterised the counterclaim against it. The counterclaim was for orders setting aside or avoiding the agreements and, alternatively to that, for unspecified equitable compensation;

(f) the fact that Sayers agreed to pay more than the contracted purchase price does not establish any causal link between the counterclaim and the excess paid; and

(g) Sayers had the burden of proof that the legal liability to pay the claimed amount resulted from the equitable compensation claim in the counterclaim.[6]

1. After noting relevant provisions of the policy, the judge made the following statement, with which Sayers takes issue:

It was not disputed that the definition of 'Loss' in the policy extended to awards of damages including equitable compensation but did not apply to claims of a non-monetary character. The only claim made against Sayers to which the definition of 'Loss' could relate was the claim for equitable compensation. The other claims against Sayers were non-monetary and did not give rise to any amount which Sayers was legally liable to pay.[7]

1. Sayers denies having accepted that the definition of 'Loss' did not extend to claims of a non-monetary character. In this Court, the parties joined issue on the question whether the definition of 'Claim' extended to claims of a non-monetary character.
2. The judge identified two issues in dispute between the parties:

(1) did the obligation to pay the increased purchase price of $11,000,000 agreed in the terms of settlement 'result from' Di Dio's counterclaim against Sayers for equitable compensation; and

(2) if so, was the claimed amount a reasonable settlement of the claim for equitable compensation made by Di Dio in the counterclaim?[8]

1. This confining of the issues to the question of equitable compensation lies at the heart of the proposed appeal.
2. The judge identified relevant principles for construing insurance policies, which he noted were accepted by the parties, including the following summary in Onley v Catlin Syndicate Ltd (as the Underwriting Member of Lloyd's Syndicate 2003):

Necessarily, a policy of insurance is assumed to be an agreement which the parties intend to produce a commercial result; as such, it ought to be given a businesslike interpretation being the construction which a reasonable business person would give to it. The contract is naturally enough interpreted, in a temporal sense, as at the date on which it was entered into. The Courts frequently have regard to the contextual framework in which a contract is formed, to the extent to which it is known by both parties, to assist in identifying its purpose and commercial objective. It goes without saying that a construction that avoids capricious, unreasonable, inconvenient or unjust consequences, is to be preferred where the words of the agreement permit.[9]

1. The judge also referred to principles of construction set out by Peden J in CIMIC Group Ltd v AIG Group Ltd ('CIMIC'):

(1) It is trite that the process of construing insurance contracts is governed by ordinary principles of contractual interpretation. A clause in an insurance policy must be considered in the context of the policy as a whole, and the policy must be set in its surrounding circumstances or factual matrix, including, if excess policies are involved, the broad scheme of insurance cover intended to provide layers of insurance against the same risk.

(2) The court seeks to give effect to the intention of the parties based on the meaning of the words used and based on what a reasonable person would have understood the language to convey. Further, where words are unambiguous, they cannot be ignored simply to reach a result that is apparently more commercially convenient. Preference is given to a construction supplying a congruent operation to the various components of the whole and to avoid making commercial nonsense.

(3) Regard may be had to the 'genesis, aim and purpose' of the contract and a commercially sensible construction is to be preferred.

(4) An objective approach is taken to the construction process. Subjective intention of the parties is only relevant to rectification.[10]

1. In respect of the first of the two issues he had identified, the judge said that the question was whether Sayers had shown on the balance of probabilities that the additional purchase price said to be the 'Loss' as defined in the policy 'resulted from' the claim for equitable compensation made against it in the counterclaim.[11]
2. As to the meaning of 'resulting from', the judge said:

In Australia, the foundational case for the construction of the phrase 'resulting from' is Kooragang Cement Pty Ltd v Bates,[12] where the New South Wales Court of Appeal reviewed previous authorities in Australia and the United Kingdom and held that where causation is an issue the case must be determined on its own facts. Kirby P ... rejected the notion that the phrase 'results from' imports an idea of causation limited to the immediate proximate cause.[13] Kirby P accepted that the occurrence of events which gave rise to a predisposition was not, of itself, sufficient to satisfy a 'results from' test. What was required was a common sense evaluation of the causal chain.[14]

1. The judge considered the risks to Sayers raised by the counterclaim.[15] Applying the principle that where a breach of fiduciary duty has occurred in respect of a purchase of land the court will in all likelihood set aside the transaction unless there cannot be restitutio in integrum,[16] the judge found that 'if the counterclaim against Sayers was made out, the most likely result would be that the land option and the impugned transaction documents would be set aside'.[17]
2. The judge quoted the witness statement of Mr Guidolin of counsel, who said:

Having reviewed the pleadings, it was my view at this stage of the proceedings that there would be complexities associated with a Court unravelling all the conduct of the parties under the agreements ... . An order setting aside the Agreement to Lease (and any other transaction documents) would give rise to a real possibility that Di Dio would be enriched by the grant of such relief without any just allowance for the [construction] work done and improvements made [on the property] by Sayers. However, there remained a real risk in my view that subject to some form of equitable adjustments, the Agreement for Lease could be set aside.[18]

The greatest risk and concern to Sayers was that the land option, [the] contract of sale and other transaction documents might be rescinded, cancelled or set aside. This would leave Sayers with a large investment in fit out and other costs on the property which it could not recover.[19]

1. The judge then turned to the terms of settlement, which he said:

(a) made no mention of the claimed amount of $1,971,604; > > (b) made no mention of the claim by Di Dio for equitable compensation; > > (c) made no provision for Mr Salvalaggio to contribute to the settlement; > > (d) achieved separation of Sayers' and Di Dio's property and financial interests so that Di Dio had no continuing interest in, or involvement with, Sayers; > > (e) expedited settlement of the sale of the property to Sayers; > > (f) cancelled the share option which avoided the prospect that Di Dio might become a minority shareholder in Sayers and a lender to Sayers; > > (g) bound the parties to seek orders to dismiss the proceeding, including the counterclaim, with no order as to costs; and > > (h) were made in the context that Best Hooper would contribute $300,000 towards Di Dio's costs.[20]

2. The judge concluded that the settlement was a 'global', 'all in' or 'multi-faceted' settlement.[21] The 'commercial and legal benefits' obtained by Sayers had six component parts:[22]

(a) resolution of Sayers' claim against Di Dio for specific performance; > > (b) resolution of Di Dio's equitable claims against Sayers including its claims for breach of fiduciary duty, unconscionable conduct, and Barnes v Addy claims; > > (c) resolution of Di Dio's statutory claims against Sayers under s 51AC(1) of the Trade Practices Act and s 21(1) of the Australian Consumer Law; > > (d) significant commercial benefits for Sayers including the cancellation of the share option valued by Sayers at $967,100, expedited registration of the plan of subdivision and expedited compliance by Di Dio with the applicable planning permit conditions and Council requirements; > > (e) separation of Sayers and Di Dio's property and financial interests; and > > (f) resolution of respective claims for legal costs.[23]

3. The judge found that it was not possible to allocate or apportion the increase in the purchase price to the individual component parts of the settlement, or to disaggregate the increase in purchase price into constituent elements, in particular the settlement of the alternative claim for equitable compensation.[24]
4. Therefore, the judge held that the $11,000,000 agreed in the terms of settlement could not be said to have 'resulted from' Di Dio's counterclaim against Sayers for equitable compensation:

It would be contrary to common sense to ascribe the whole of the increased purchase price to the claim for equitable compensation thereby disregarding all of the other benefits obtained by Sayers from the terms of settlement.[25]

1. The judge's conclusion was summarised as follows:

[the] increased purchase price was part of a global or 'all in' commercial agreement negotiated between the parties which effected a rearrangement of their legal, financial and property interests as well as the resolution of the litigation between them.[26]

1. In respect of the second issue he had identified, as to the reasonableness of the settlement, the judge referred to the principles set out in Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG:

The onus of demonstrating that a settlement amount is reasonable rests on the party relying on a settlement as proof of its loss.

The test of reasonableness is an objective test. The subjective reasoning of the party relying on the settlement does not determine whether the settlement amount was reasonable.

The reasonableness of a settlement amount depends on the circumstances existing at the time of settlement. The settlement amount must be assessed based on the material the parties had available to them at that time and cannot be judged on material obtained later.

Demonstrating reasonableness requires proof not only that the result was reasonable but also that the negotiations were conducted with proper care and skill. The settlement amount must reflect the relevant party's true prospects of success if the proceeding had been conducted with care and skill because otherwise it will merely reflect that party's impaired prospects. The risk involved in the litigation and the reasoning which led to the settlement are the factors that will determine whether or not the settlement amount was reasonable. The assessment of reasonableness will often require consideration of whether the party that later seeks to rely on the settlement had made sufficient inquiries and had sufficient information available to it to warrant making a compromise. That party must have acted reasonably in discovering the circumstances material to the settlement at the time of settlement. This may invite consideration of whether the cost of obtaining further information would outweigh the benefit, but knowledge of the opposite party's brief to counsel is not assumed.

There is no single answer to the question of what will constitute a reasonable settlement amount. That question requires consideration of the chances of the parties succeeding in their respective claims or defences. Prediction of likely outcomes in litigation is imperfect and imprecise. For this reason, in each case there will be a range within which a settlement amount will be reasonable.[27]

1. The judge distinguished the current case from liability insurance policy cases 'where the monetary liability of the insured is the sole or principal issue in the earlier proceeding and forms the basis of a liability insurance claim'.[28] Here, the claim by Di Dio for equitable compensation formed only a 'relatively small' component of the issues between Sayers and Di Dio in the earlier proceeding.[29]
2. The judge said:

It is not open to conclude, as Sayers must establish, that the increased purchase price was a fair and reasonable settlement of the monetary claim made by Di Dio for equitable compensation by Sayers. It was not directly linked with the claim for equitable compensation. There was little, if any, nexus between the claim by Di Dio against Sayers for equitable compensation and the increased purchase price paid by Sayers to ensure that it obtained all of the benefits that it received under the terms of settlement. It is not possible for the Court to allocate or apportion the purchase price of the property amongst all of the different legal and commercial benefits that Sayers obtained.[30]

1. The proposed appeal raises the single question whether Sayers' liability to pay the settlement amount was a loss covered by the policy. It is convenient, however, to approach the matter by reference to the proposed grounds of appeal upon which Sayers relied, according to which the parties presented their arguments. The grounds can be summarised as follows:

(1) The judge erred in finding that the only Claim (as defined in the policy) relevant to the question of Loss (as also defined) was the equitable compensation claim in the counterclaim.

(2) The judge erred in failing to conclude that the Loss for which Sayers was legally liable under the settlement agreement 'resulted from' all of the claims in the counterclaim.

(3) The judge erred in concluding that the settlement was not reasonable in all the circumstances.

(4) The judge failed to assess and apply the legal principles, and to assess the relevant factors, by which reasonableness is determined.

(5) The judge failed to accept that the Loss was reasonable or to determine what amount was reasonable.

If the above grounds are not made out, the following grounds are proposed in the alternative:

(6) The judge erred by failing to conclude that the Loss for which Sayers was legally liable under the settlement agreement 'resulted from' the equitable compensation claim.

(7) The judge failed to find that the settlement agreement was reasonable as a settlement of the equitable compensation claim.

Ground 1: did the judge err in finding that the equitable compensation claim was the only relevant 'Claim'?

1. AIG contended that ground 1 (and consequently grounds 2, 3, 4 and, to an extent, ground 5) raised 'a new case that the claimed amount was a reasonable settlement of, and resulted from, the entirety of the Counterclaim, or resulted from the mediation - notwithstanding Sayers' case was otherwise at trial'. AIG submitted that there were no exceptional circumstances which would justify departing from the 'strictly applied' rule that a party cannot raise a new argument on appeal that was not put at first instance.[31]
2. The judge concluded that the only 'Claim' relevant to the question of 'Loss' under the policy was the equitable compensation claim in the counterclaim. He said further that 'Sayers does not advance any fallback or alternative position in the event that the attribution of the whole of the increased purchase price to the alternative equitable compensation claim is seen to be wrong'.[32]
3. Sayers submitted that this was not correct. Senior counsel pointed to further and better particulars relied on by Sayers at trial in which it was said that the Loss resulted from the counterclaim 'which comprised a Claim under the Policy'. In oral submissions, counsel had submitted that the $1.9 million figure was 'concordant with all of the risks'. AIG, on the other hand, referred to the reply filed by Sayers, and Sayers' further and better particulars, which, in AIG's submission, concentrated on the equitable compensation claim. AIG also referred to other oral submissions made on behalf of Sayers.
4. It is true that Sayers devoted a significant part of its submissions at trial to the equitable compensation claim. But we do not agree that it confined its submissions in that way. Equitable compensation was, rather, the clearest illustration of the potential Loss, relied on as part of the wider point that Sayers was exposed to a collection of risks on the counterclaim. For example, in its further and better particulars as to the reasonableness of the settlement, Sayers contended that, by reason of the allegations against it, Sayers was 'at risk that if the Court found that the Agreement to Lease (and/or the other transaction documents) should be set aside, Sayers would lose its business of running a hotel and gaming venue at the Land'. The particulars went on to say that, given the grave consequences, 'the claims in the proceeding ... were ones which a prudent defendant ... would endeavour to compromise'. In its further and better particulars as to the 'Claim', Sayers identified the counterclaim, and not only the equitable compensation claim, as a Claim under the policy. While it is up to a party to identify the components of the case it advances and a court is not required to trawl through all of the written particulars in order to ensure that each one remains alive and needs to be addressed, the submissions advanced by Sayers at trial clearly extended beyond the equitable compensation claim, and this was supported by the particulars. Consistent with that position, in its written opening, in justifying the amount of the settlement, Sayers referred to its potential loss of more than $5 million if the lease was set aside, which it said would also raise the question what business Sayers would be left with.
5. If anything, it appears to have been AIG that concentrated on the matter of equitable compensation, in part to support its contention that Sayers had not shown that the settlement agreement was a response to specific claims, rather than a commercial property transaction. In its written opening, it said that '[n]othing in Sayers' materials suggests that the $1.9 million was paid following an assessment of the risk of an amount of equitable compensation being awarded against it'. This matter was taken up in AIG's final submissions, and it was submitted that the claim against Sayers was to set aside transaction documents, such that the payment of the settlement amount did not result from the claim.
6. We therefore do not agree that Sayers confined its case in the manner the judge identified. In the circumstances, there is no basis to prevent Sayers from relying on the first ground of appeal.[33]
7. The judge recorded that it was not in dispute that Di Dio's counterclaim was a Claim as defined in the policy. In this Court, Sayers put this characterisation on two bases. First, the counterclaim was 'a civil ... proceeding, including a counter-claim, seeking compensation or other legal remedy'. The parties agreed that the counterclaim was within the definition at least in so far as the alternative claim for equitable compensation was concerned. They differed as to whether the words 'other legal remedy' extended to non-monetary claims. The second basis on which Sayers relied was that Di Dio's claim against it was a 'mediation ... proceeding ... seeking compensation or other legal remedy'. Senior counsel for Sayers did not suggest that any different result flowed from this second characterisation.
8. The principal issue in ground 1 therefore resolves to whether the expression in the definition of 'Claim', namely 'counterclaim ... seeking compensation or other legal remedy', extends to claims of a non-monetary character.
9. As noted earlier, the judge stated that it

was not disputed that the definition of 'Loss' in the policy extended to awards of damages including equitable compensation but did not apply to claims of a non-monetary character.[34]

1. It follows from our conclusion as to the way Sayers advanced its case that it was contending that the whole of the counterclaim also fell within the definition of 'Claim', including the non-monetary claims in the counterclaim. The matter was disputed, and we therefore turn to that issue.
2. Sayers submitted that 'other legal remedy' in the definition of 'Claim' was a claim relevant to the question of 'Loss', which included all the remedies sought in the counterclaim. It was submitted that reasonable business people would take the expression to be intended to ensure broad coverage for acts, errors or omissions, whether compensatory or non-compensatory.
3. AIG submitted that 'Claim' could only mean a claim for liability that produces indemnifiable 'Loss'. It could not extend to non-monetary claims, such as a claim to have a transaction set aside or a claim for injunctive relief, that could not result in a liability to pay. Accordingly, the policy did not respond to a settlement of such claims. It was submitted that this construction achieved coherence with the definition of 'Loss' as 'any amount which the insured is legally liable to pay resulting from a Claim'.
4. In our opinion, the construction advanced by Sayers is to be preferred.
5. First, the text of the phrase in question, 'compensation or other legal remedy' is suggestive of a broadening of the definition. If 'other legal remedy' means 'other legal monetary remedy', the phrase adds very little to 'compensation'. The word 'compensation' means 'an amount given or received as recompense for a loss suffered'.[35] It is apt to cover the great majority of claims made in proceedings of the kind described in sub-paragraph (i)(b) of the definition of 'Claim'.
6. Secondly, as a matter of context, the narrow reading of 'other legal remedy' in the definition of 'Claim' does not sit comfortably with the text of the definition. Several other paragraphs of the definition, including '(a) a written demand', '(c) a criminal proceeding', and '(ii) an Investigation' (defined to include a hearing, examination, investigation or inquiry into the company's affairs), are capable of extending to non-monetary claims. In those circumstances, there is no reason why the apparently expansive words 'other legal remedy' should be read as excluding proceedings seeking non-monetary relief, in the case of one sub-paragraph only of the definition of 'Claim'. To the contrary, if those words have a limiting operation on the sub-paragraph in which they appear, it is an anomalous one.
7. Finally, the purpose of 'coherence' with the definition of 'Loss', to which AIG pointed, takes insufficient account of the express requirement of causation in that definition and the implied requirement of reasonableness of any settlement. The presence of the word 'settlement' in the definition of 'Loss' makes it clear that, where those criteria are met, a liability to pay under a settlement may constitute an insurable loss under the policy. In other words, a 'Loss' might arise on the settlement of a 'Claim', however 'Claim' is construed. It is therefore not necessary, in the interests of coherence, to exclude non-monetary claims from the definition of 'Claim'.
8. If the definition of 'Claim' is insufficient to circumscribe the way in which 'Loss' applies in the case of a settlement, it should not be overlooked that the policy gives AIG specific rights in respect of the defence and settlement of any Claim. While those rights are not raised in the current proceeding, AIG had avenues under the policy for seeking to avoid disproportionate claims arising from settlements.
9. It is not necessary to address the alternative case Sayers advanced, by reference to the word 'mediation' in the definition of 'Claim'. Our conclusion as to the meaning of 'other legal remedy' means that the counterclaim as a whole fell within the definition of 'Claim', and so ground 1 must be upheld.

Ground 2: causation - did the settlement amount 'result from' the counterclaim?

1. Sayers argued that the relevant question which the judge failed to address, as a result of the error identified in ground 1, was whether the amount paid under the settlement agreement was an amount which Sayers was legally liable to pay 'resulting from' the counterclaim. AIG accepted that this was the issue raised by ground 2. It was not suggested that there was any other part of the definition of 'Loss' which Sayers needed to satisfy.
2. Sayers submitted that the settlement agreement dealt with all the claims in the counterclaim, and the Loss resulted from those claims and included the amount Sayers was liable to pay under the settlement agreement. Reliance was placed on evidence of one of the directors of Sayers, and its lawyers, to support the conclusion that the purchase price agreed in the settlement was negotiated as an 'all in' figure to resolve all claims in the proceeding.
3. Sayers relied on National Australia Bank Ltd v Nautilus Insurance Pte Ltd [No 3] ('Nautilus') for the proposition that the liability of AIG to indemnify it was 'that which arises upon entry into the settlement'.[36] Sayers also submitted that the Court should adopt the reasoning of Peden J in CIMIC, to the effect that the settlement 'resulted from', in the sense of being casually connected to, the mediation of the Claim.[37]
4. The phrase 'resulting from' in the context of the definition of liability in an insurance contract has been said to require a 'commonsense evaluation of the causal chain',[38] although the utility of that phrase in addressing questions of causation has more recently been doubted.[39] The parties' submissions concentrated, however, on an anterior question as to the construction of the definition of 'Loss'. AIG submitted that, in so far as the provision extended to a settlement, it did not cover liability resulting only from a settlement, and that there also had to be an underlying liability to pay the amount irrespective of the settlement. It referred to Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance ('Weir Services')[40] and AstraZeneca Insurance Company Ltd v XL Insurance (Bermuda) Ltd ('AstraZeneca'),[41] in support of that submission. Senior counsel for Sayers submitted in response that AIG was seeking to import into Australian law a principle about establishing liability apart from the liability to pay an amount by way of settlement, that had been applied in the United Kingdom but was inconsistent with Nautilus.
5. A similar construction was alluded to, but not advanced by the insurer, in CIMIC. The policy wording in that case was almost identical to that with which we are dealing. Peden J observed that it had not been submitted, as AIG does now, that the insured needed to establish that it would have been liable to the third party in a judgment, had it not settled the claim.[42]
6. The submission of senior counsel for AIG before us focused on the suggested lack of coherence in a policy allowing for recovery of amounts paid under a settlement of a claim which could not (apart from defence costs) of itself have given rise to a liability to pay, such as a constructive trust claim. It was said to be anomalous that the policy would respond to a settlement of a claim to which it would not have responded, but for the settlement.
7. In CIMIC, Peden J held that the explicit reference to 'settlements' in the definition of 'Loss' was necessary to give effect to the 'plain and ordinary meaning' of the prefacing words of the definition of 'Claim', which was 'defined broadly' to include a 'mediation ... seeking compensation or other legal remedy'.[43]
8. AIG submitted that this conclusion was incorrect, and relied instead on the decision in Weir Services. In that case, however, the parties accepted that a liability to which the insuring clauses responded was capable of being determined by a judgment, arbitral award or reasonable settlement.[44] In other words, the question of construction raised in the present case was not raised in Weir Services. The issue was rather whether a 'cap and collar agreement' was a determination of liability. On that issue, the Court divided. There was no dispute, however, as to the principles involved. In particular, Barrett AJA (with whom Meagher JA agreed) said:

The notion that an agreement between the parties may be the source of a liability of the insured for the purposes of a liability policy was recognised by the House of Lords in Post Office v Norwich Union Fire Insurance Society Ltd.[45] Lord Denning MR was there of the opinion that, under a policy specifying that the insured only acquired rights against the insurer when his or her liability to the injured person had been established, it was necessary that that liability be 'ascertained and determined to exist, either by judgment of the court or by an award in arbitration or by agreement'.[46] Lord Salmon said that 'whether or not there is any legal liability ... can, in my view, only be finally ascertained either by agreement ... or by an action or arbitration'.[47]

In Orica Ltd v CGU Insurance Ltd, Spigelman CJ referred to these observations of Lord Denning and Lord Salmon when saying:[48]

• There is a line of authority with respect to policies of liability insurance that the liability of the insurer arises only as and when the liability of the insured is established in the sense of being crystallised by settlement, arbitration or verdict.[49]

1. Sayers submitted that AIG's submission departed from these authorities and that, in effect, it embraced the United Kingdom position described in AstraZeneca in the following terms:

Under English law a liability policy is, generally speaking and in the absence of wording to the contrary, a policy which indemnifies the insured in respect of actual liability. That means that, in order to recover from his insurer the insured must show that he was liable to the person who claimed against him. Liability cannot be determined in a legal vacuum. Hence the need to assume, for this purpose, a correct application of the law governing the claim in question to the facts properly found.

In the event of dispute the existence of liability has to be established to the satisfaction of the insurer, or, failing that, by the judge or arbitrator who has jurisdiction to decide such a dispute. It is not, therefore, necessarily sufficient for the insured to show that he has been held liable to a claimant by some court or tribunal or that he has agreed to settle with him. In practice the fact that this has occurred may cause or persuade the insurer to pay, but, if it does not, the insured must prove that he was actually liable.[50]

1. Both the approaches relied upon in the cases referred to are, in any event, ultimately presumptions to aid construction, rather than overriding statements of legal principle. So, in Nautilus, it was pointed out that the High Court's decision in Distillers Company Bio-Chemicals (Australia) Pty Ltd v Ajax Insurance Co Ltd[51] is authority against the general proposition that, provided a settlement is reasonable, the insurer is liable to pay the settlement sum.[52] The parties did not make submissions directed to the correct approach to these authorities.[53] Like Peden J in CIMIC,[54] we find it unnecessary to address them in any detail. That is because, on any view, the express reference to 'settlements' in the definition of 'Loss' confirms that liability resulting from a settlement is insurable under the policy. We reject AIG's submission to the contrary. The construction advanced on its behalf failed to account for the express reference to 'settlements' in the definition of 'Loss', and the inclusion of 'mediation ... proceedings' in the definition of 'Claim'.
2. Since the obligation of Sayers to pay the settlement amount was a liability that resulted from the counterclaim, ground 2 must be upheld.

1. Grounds 3 to 5 raise a number of arguments in respect of reasonableness, and it is convenient to deal with them together.
2. Sayers submitted that the judge ought to have held that the settlement was reasonable in all the circumstances. In particular, he should have considered the prospects or risk of a claim succeeding in the assessment of reasonableness at the date of settlement. This was addressed in the prospects advice of Mr Moore KC and Mr Guidolin. Sayers observed that the High Court has described this kind of evidence as 'vital' in the assessment of reasonableness of a settlement in indemnity claims.[55] Sayers submitted that the judge's conclusion that the settlement was a commercial one did not exclude it being legally reasonable.[56]
3. Sayers submitted that the judge should have found that the true prospects of success of the counterclaim were assessed by Mr Moore KC and Mr Guidolin respectively as being within the range of 70/30 or 50/50 (depending on whether or not the court accepted the evidence of Mr Salvalaggio), and 60/40 at best. Mr Kerr had considered that there was a 50 per cent chance that the contract of sale would be set aside or that it would be liable to pay compensation being effectively the price of the Tarneit property at the time of exercise of the option or at judgment, together with interest and legal costs together totalling at least $1 million (including party-party costs if unsuccessful). Therefore, Sayers argued, the settlement amount of approximately $1.9 million was within the range of reasonableness in all the circumstances.
4. AIG argued that Sayers cannot claim amounts paid for reasons extraneous to the liability covered by the policy.[57] It did not point to specific 'extraneous' reasons, if the question of reasonableness was found to concern the counterclaim as a whole, rather than only the claim for equitable compensation as the judge had found. Instead, AIG submitted that Sayers bore the onus of proving a reasonable settlement, and that if it failed to do so, it was not for the court to determine what amount would have been reasonable. In any case, it was submitted that Sayers had not sought to have the judge determine a reasonable amount at trial, and it should not be permitted to seek such a determination for the first time on appeal.
5. There was no dispute that the policy only responded to a settlement that was reasonable, nor as to the principles governing the determination of the reasonableness of a settlement for these purposes. Those principles were addressed in Delta Pty Ltd v Team Rock Anchors Pty Ltd.[58] Dalton J cited MacGillivray on Insurance Law to the following effect:

In order to recover under a conventional liability policy, the assured must show that it was under a legal liability to the third-party claimant; that the liability is covered by the insurance, and (in the case of a settlement) that any amount paid by way of settlement was reasonable.[59]

1. Dalton J then summarised the principles in terms subsequently approved when the matter was heard by the Court of Appeal:

To establish a liability, a settlement 'must not only be reasonable but also bona fide'.[60] The question of reasonableness is to be determined, 'based on a reasonable assessment of the risk faced by [the insured] if the [third party] claims were to proceed to trial and judgment'.[61] The settlement 'must reflect the plaintiff's true prospects of success if the proceedings had been conducted with care and skill'.[62] The insured is 'required to have regard to the proper interests of the insurer and [can] not claim indemnity under the policy in respect of amounts payable under a settlement which [does] not reflect, by its terms, a reasonable evaluation of the prospects of a successful defence to a third party's claim'.[63] Monies paid for an ulterior purpose, that is a purpose 'extraneous to the risks insured against', will mean that there is not such a bona fide settlement of a liability.[64] In the Distillers Bio-Chemicals case, [Stephen J] gave examples of extraneous reasons which might motivate an insured to settle: monies paid to avoid adverse publicity or to relieve a parent company of its part in liability for a dangerous product.[65] It is not that such matters make the settlement unreasonable generally: they may provide sensible commercial reasons to settle. But in terms of the rule currently under discussion, these extraneous motives mean that the settlement is not reasonable because it is not a bona fide or accurate measure of liability in the action.[66]

1. Because the judge focused on the alternative claim for equitable compensation, he did not determine whether the settlement was a reasonable settlement of the whole of the counterclaim. As we have said, AIG did not advance specific submissions against a finding of reasonableness. It submitted, rather, that reasonableness was closely related to causation, and that these grounds would fall the same way.
2. The onus is, none the less, on Sayers. As noted, Sayers relied principally on the unchallenged evidence of advice provided by its counsel at the time of the settlement. Evidence of that nature is important in this context.[67]
3. The advice of counsel pointed to a significant risk that the counterclaim would succeed. Mr Guidolin of counsel regarded the final offer to pay $11 million as within the range that Sayers would pay if the counterclaim were to succeed; the figure was well within the range of the last offers, being $12.5 or $13 million in the case of Di Dio and $9.5 million in the case of Sayers. Sayers was also exposed to the risk of paying Di Dio's costs as well as its own costs if the matter proceeded to trial. In that event, Sayers' solicitors advised that Sayers' own costs would be 'substantially more than $500,000', while Di Dio's were estimated to be similar. Mr Kerr's view was that it would be commercially catastrophic for Sayers if the agreement for lease were to be set aside, as to which he considered there to be a real risk.[68]
4. Some attention was given in oral submissions to the option to acquire shares in Sayers. That was of some value to Di Dio. Cancellation of the option was said to be worth $967,100 to Sayers.[69] Senior counsel for Sayers suggested the value might only be nominal. It is not obvious that it would have been reasonable (or in the best interests of the company) for Sayers to pay Di Dio not to exercise the option. In the end, there is in any case no evidence that the cancellation of the share option affected the settlement amount. Once the question of the land was resolved, it was commercially sensible for the parties to separate their interests. In that way, the share option was incidental to the principal issues in dispute. Its termination can be likened to the agreement for general releases, a consequence of a commercial settlement rather than an integral substantive element. Mr Kerr described it as part of the agreement that the parties should have no further dealings with each other.
5. In the settlement, Sayers acquired the property for $11 million. It was then valued at $11.9 million but the previous purchase price, under the option, was $8,925,140. In the meantime, Sayers had incurred $5,350,140 in building and construction costs to develop the gaming venue, expenditure that was at risk as a result of the counterclaim. In relation to the claim for equitable compensation, Sayers was exposed to the risk of paying interest and Di Dios's legal costs, together with its own costs, totalling at least $1 million. Legal costs on their own, if Di Dio succeeded on the counterclaim on either basis, would not have been far from that amount. In a lengthy mediation at which all parties were legally represented, the amount paid by Sayers represented the cost of settling the counterclaim and avoiding the risks to its business that the counterclaim represented. We are satisfied in all the circumstances that the settlement was a reasonable one.
6. It is therefore not necessary to consider the alternative argument advanced by Sayers, to the effect that this Court can and should determine what would have been a reasonable settlement amount.

Grounds 6 and 7: the equitable compensation claim

1. In the alternative, Sayers argued that, even if the only relevant claim under the definition of 'Claim' in the policy was the equitable compensation claim (as the judge found), the judge erred in failing to conclude that the legal liability Sayers incurred under the settlement agreement resulted from that claim.[70]
2. Sayers further argued that the judge erred when he did not find that the settlement amount was within the reasonable range of settlements of the equitable compensation claim, having regard to all the circumstances, including the parties' respective prospects of success and the likely costs of the primary proceeding.
3. In light of our earlier conclusions, it is not necessary to address these grounds.

1. Sayers has established that the liability to pay the settlement amount was a 'Loss' within the terms of the policy and that the claim was one to which the policy responded. Leave to appeal should be granted and the appeal should be allowed. The judge's orders should be set aside and judgment entered for Sayers. We will hear the parties as to the costs of the trial and the appeal.

[1] [1874] UKLawRpCh 20; (1874) LR 9 Ch App 244.

[2] Sayers Property Holdings Pty Ltd v AIG Australia Ltd [2024] VSC 139, [43]-[48] (Garde J) ('Reasons').

[9] [2018] FCAFC 119; (2018) 360 ALR 92, 100-1 [33] (Allsop CJ, Lee and Derrington JJ) (citations omitted); [2018] FCAFC 119, cited at Reasons [30].

[10] [2022] NSWSC 999 [122] (citations omitted), cited at Reasons [31].

[12] (1994) 35 NSWLR 452, 463-4 (Kirby P, Sheller JA agreeing at 465, Powell JA agreeing at 465) ('Kooragang').

[14] Reasons [35]. Among other cases, the judge also referred to The Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2021] FCA 907; (2021) 396 ALR 590, 609 [95] (Allsop CJ) ('Star Entertainment'); [2021] FCA 907 and Certain Underwriters at Lloyd's of London v Allianz Australia Insurance Ltd [2018] VSC 735 [48] (Riordan J).

[16] King v Lintrose Nominees Pty Ltd (1993) V ConvR 54-483, 65,621 (Hayne J); Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 467 (Brennan CJ, Gaudron, McHugh and Gummow JJ).

[27] [2014] VSCA 338 [744]-[749] (Tate, Santamaria and Kyrou JJA) (citations omitted) ('Protec').

[31] Water Board v Moustakas (1988) 180 CLR 491, 497 (Mason CJ, Wilson, Brennan and Dawson JJ).

[33] AIG did not suggest that it was prejudiced in any way by Sayers advancing the argument in ground 1, even if it was not run at trial.

[35] Encyclopaedic Australian Legal Dictionary (online at 5 November 2025) 'compensation'.

[36] [2019] FCA 2139 [31]-[32] (Lee J).

[37] [2022] NSWSC 999 [414].

[38] Kooragang (1994) 35 NSWLR 452, 463-4 (Kirby P, Sheller JA agreeing at 465, Powell JA agreeing at 465); Smart v AAI Ltd [2015] NSWSC 392 [200] (Beech-Jones J); Star Entertainment [2021] FCA 907; (2021) 396 ALR 590, 609 [95] (Allsop CJ). See also March v E & MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506, 515 (Mason CJ, Toohey J agreeing at 524, Gaudron J agreeing at 525).

[39] Young v Chief Executive Officer (Housing) [2023] HCA 31; (2023) 278 CLR 208, 231-2 [60] (Gordon and Edelman JJ); Tapp v Australian Bushmen's Campdraft & Rodeo Association Ltd [2022] HCA 11; (2022) 273 CLR 454, 487-8 [101] (Gordon, Edelman and Gleeson JJ); Fisher v Nonconformist Pty Ltd [2024] NSWCA 32; (2024) 114 NSWLR 1, 26-9 [103]-[115] (Kirk JA, Meagher JA agreeing at 4 [1], Simpson AJA agreeing at 35 [149]).

[40] (2018) 359 ALR 314; [2018] NSWCA 100, [3]-[4] (Meagher JA), [74]-[76] (Barrett AJA).

[41] [2013] EWCA Civ 1660; [2014] 2 All ER (Comm) 55.

[42] CIMIC [2022] NSWSC 999 [408].

[44] (2018) 359 ALR 314, 315 [2] (Meagher JA).

[45] [1967] 2 QB 363.

[48] [2003] NSWCA 331; (2003) 59 NSWLR 14, 20 [15].

[49] (2018) 359 ALR 314, 328 [63]-[64]; see also White JA at 317-8 [17]-[18].

[50] [2013] EWCA Civ 1660; [2014] 2 All ER (Comm) 55, 61-2 [16]-[17] (Christopher Clarke LJ, Briggs LJ agreeing at 74 [84], Moore-Bick LJ agreeing at 74 [85]).

[51] [1974] HCA 3; (1974) 130 CLR 1 ('Distillers').

[52] Nautilus [2019] FCA 2139 [13].

[53] See, eg, Vero Insurance Ltd v Baycorp Advantage Ltd [2004] NSWCA 390 [48]-[49] (Tobias JA, Giles JA agreeing at [1], McColl JA agreeing at [89]) ('Vero Insurance'); Delta Pty Ltd v Mechanical and Construction Insurance Pty Ltd [2019] 3 Qd R 438, 449 [13] n 5 (Fraser JA, McMurdo JA agreeing at 495 [159], Flanagan J agreeing at 495 [163]); Royal and Sun Alliance Insurance PLC v DMS Maritime Pty Ltd [2019] QCA 264 [34]-[35] (McMurdo JA, Fraser JA agreeing at [12]), and see generally, Kirsty Sutherland, 'An Uneasy compromise: An Analysis of the Effect of a Settlement Reached by an Insured with a Third Party Claimant vis-à-vis his or her Insurer' (1998) 9 Insurance Law Journal 1; JE Marshall and JAC Potts, 'Indemnity for settlements: Proof of underling liability' (2008) 19 Insurance Law Journal 97; Roger N Traves, '"In what circumstances is an insurer bound by a judgment or settlement against its insured?" (an Australian perspective)' (2015) 26 Insurance Law Journal 209.

[54] [2022] NSWSC 999 [408].

[55] Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603, 616 [35] (McHugh J), 653 [129] (Hayne J) ('Unity Insurance'); Protec [2014] VSCA 338 [745], [751]-[753] (Tate, Santamaria and Kyrou JJA).

[56] Protec [2014] VSCA 338 [756] (Tate, Santamaria and Kyrou JJA).

[57] Citing Distillers [1974] HCA 3; (1974) 130 CLR 1, 32-3 (Stephen J) and Broadlands Properties Ltd and Broadlands Estates Ltd v Guardian Assurance Co Ltd (1984) 3 ANZ Ins Cas 60-552, 78,324-78,325 (Chilwell J) (High Court of New Zealand).

[58] [2018] 1 Qd R 564.

[59] Delta Pty Ltd v Team Rock Anchors Pty Ltd [2018] 1 Qd R 564, 598 [137] citing John Birds, Ben Lynch and Simon Milnes, MacGillivray on Insurance Law (Sweet & Maxwell, 12th ed, 2012) 971 [29-006]. See also Unity Insurance (1998) 192 CLR 603, 612-3 [23] (McHugh J), 651 [123] (Hayne J, Brennan CJ agreeing at 607 [1], 608 [6]).

[60] Vero Insurance [2004] NSWCA 390 [68] (Tobias JA, Giles JA agreeing at [1], McColl JA agreeing at [89]).

[61] CGU Insurance Ltd v AMP Financial Planning Pty Ltd (2007) 235 CLR 1, 14 [24] (Gleeson CJ and Crennan J).

[62] BNP Paribas v Pacific Carriers Ltd [2005] NSWCA 72 [17] (Handley JA).

[63] Distillers [1974] HCA 3; (1974) 130 CLR 1, 32 (Stephen J).

[66] [2018] 1 Qd R 564, 599-600 [142]; Delta Pty Ltd v Mechanical and Construction Insurance Pty Ltd [2019] 3 Qd R 438, 456-7 [36] (Fraser JA, McMurdo JA agreeing at 495 [159], Flanagan J agreeing at 495 [163]). See also CIMIC [2022] NSWSC 999 [419]-[420] (Peden J).

[67] Unity Insurance (1998) 192 CLR 603, 616 [35] (McHugh J), 653 [129] (Hayne J); Protec [2014] VSCA 338 [745], [751]-[753] (Tate, Santamaria and Kyrou JJA).

[68] The subjective views of the insured are, of course, not determinative of the objective question of reasonableness: Unity Insurance (1998) 192 CLR 603, 656 [140] (Hayne J).

[70] Citing CIMIC [2022] NSWSC 999 [414] (Peden J).